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What inspired you to write this book?

The economic arguments for markets have generally been won, but the moral argument hasn’t.

Even if people admit that markets lead to greater growth and prosperity, they often say, “But aren’t we losing our souls when we do all this type of stuff?” I wanted to show them how much data there actually is on this topic and make a robust argument for the moral character of markets.

In your first chapter, you discuss the building blocks of a commercial society. What are those building blocks?

When I use the term “commercial society,” I’m riffing off of Adam Smith. The way that he talks about commercial society is very much connected to his notion of division of labor. A commercial society is one in which most people are merchants or middlemen of some sort.

Some of the best proxies are things like the Economic Freedom of the World Index that’s produced by the Fraser Institute. They use five major categories to define economic freedom: the size of government, private property rights and the rule of law, sound money, openness to trade, and regulation. But I also try to point out that a commercial society, a market society, can take various shapes and sizes. Nordic countries, for instance, have large welfare states, but their corporate taxes are low, and their openness to trade is high. You still have this general sense of freedom when it comes to exchange. So, commercial society is a little bit broader than we might think.

Are commercial societies more trusting and trustworthy?

Yes.

In more economically free countries, people are more trusting of strangers. Ginny Choi and Virgil Storr have some interesting data on this, looking at social distance. Everybody usually trusts their close friends and family. Then you move out a bit. What about your neighbors, the people you work with, or the people you go to church with? Then you can go out and out until you reach total strangers. That is what they mean by social distance.

Now, as you increase social distance, trust declines a lot more slowly in market societies, and those in economically free countries tend to trust strangers far more than those in non-market societies. And some have argued that there’s a causal relationship, because when countries implement market reforms, trust starts to rise. It’s still hard to figure out which causes which, but to me, it’s just a virtuous cycle.

Markets run on reputations. When someone cheats you, you don’t want to deal with them anymore. You might make some profit here and there cheating people, but eventually it catches up to you. You find this in laboratory studies and in real life. A market society is built on trust and continually builds trust. It doesn’t just require social capital; it produces it.

There’s a really interesting experiment that took East and West Germans and had them play a kind of dice-rolling game. They found that the longer the exposure someone had to communism, the more likely they were to cheat. Communism and other centralized economic systems require people to work around the system in order to get the things that they need. That trains them to bribe, lie, and act dishonestly.

You also devote a chapter to how people in commercial societies are more fair. Tell me about that.

By fairness, I mean impartiality: treating different people the same way.

One institution that people generally consider fair is democracy, and some have argued that markets tend to undermine democracy. That isn’t the case. There was a recent study by Alex Tabarrok and Vincent Geloso that found an interdependence between democracy and economic freedom. As economic freedom goes down, democracy tends to decline. And, in a number of studies, economic freedom tends to have a strong effect on other human rights.

So, economic freedom tends to lay the foundation for the political institutions that protect our rights. But again, this trickles down into the broader culture. There was one study that looked at different villagers and had them perform an experiment in which they had the option to cheat someone else. They found that those with greater market contact treated other participants more impartially, while those with less market contact were more willing to cheat non-villagers. You also see this in some of the work of Joseph Henrich and others. They’ve gone to agrarian societies, like hunter-gatherer societies, and played the ultimatum game. The ultimatum game involves a giver and a receiver. The giver can choose to split a particular sum. They could split it 50/50, but they might split it 99 to 1. And if the receiver says, “Yeah, I’ll take that,” then you both go home with it. But if the receiver says, “No, I don’t want that. That’s unfair,” nobody gets it. They found that those with more market contact left more on the table in these games.

The explanation is that market contact allows you to see others as beneficial to you, which makes you treat people better. You see others less as threats, and more as potential collaborators.

Let’s talk about gender relations. Is it true, as you write, that there are fewer battles of the sexes in a commercial society?

Sex is probably one of the biggest factors that influences how other people treat us. Many societies have attitudes like, “we have to protect the women.” And a lot of the time that protection ends up being a kind of patriarchal control over the household.

Economic freedom undermines that structure. Once you start to place more economic activity outside of the home, women start to go outside the home and earn their own money, and with their own income, women can escape an abusive household or a bad marriage. You also see equalization across the genders. You see it with income, as well as with literacy and education. There’s a delay in childbearing. Women start to be more present in public life rather than confined to the household. And when they are seen in public, competent and making decisions, it changes people’s perspectives. If you care about women’s rights, you should care about economic freedom as well.

So, women are treated better in commercial societies. What about more broadly? Are people more tolerant generally in a commercial society?

Yeah, that’s another thing. Discrimination has costs. When you cut yourself off from a whole subset of the population because of their race, ethnicity, religion, or whatever, you can’t do business with them. You’re gonna miss out on customers and talent. And you do see that as economic freedom goes up, racial tolerance goes up, tolerance towards homosexuals goes up, and also tolerance towards groups with ideas you may not like, like atheists or even communists. In India, you’re seeing the caste system start to decline since the market reforms in the 1990s. People are more willing to do things with Dalits who were considered “untouchables.”

Antisemitism is a particularly potent kind of prejudice that has a somewhat mixed relationship with economic freedom. Some aspects of economic freedom, like open trade, for example, tend to increase antisemitism somewhat. But other aspects, such as the rule of law and property rights, tend to decrease it. Overall, however, you still find that antisemitism tends to fall with greater economic freedom.

Now, when you claim that commercial societies are less racist, invariably someone is going to respond that in the history of capitalism, there was a long period when human beings could be bought and sold based on race. So tell me, what about slavery?

Yes. It’s a totally legitimate concern.

I try to point out that people like Adam Smith made both moral and economic arguments against slavery. They argued that slavery was inefficient compared with free labor. Slavery is probably the most restrictive form of labor market regulation there is. You’re depriving a subset of the population of the rights that other people have, and you are restricting them to a certain plot of land or to a certain task. That becomes less productive over time. A variety of studies have shown that areas which have slavery or used to have slavery even tend to lag behind those that either got rid of it more quickly or used a freer labor system.

I also think it’s important to point out that slavery was heavily regulated and supported by the government. Phil Magness in particular has pointed out that slavery in the United States was a heavily subsidized system that wasn’t very economically competitive.

Moving on to another form of violence. Do commercial societies fight other countries less?

Yes. In general, international trade tends to lead to fewer wars. The logic behind this is pretty straightforward: if your customers are in another country or your supply chain runs through another country, bombing it into oblivion is less attractive. And when a country produces goods and services that you buy, they become partners of some sort, and you’re less likely to fight your friends. But you also see an effect on civil wars and coups. You’re less likely to experience coups in societies that are more market-oriented and have more open trade. You’re also less likely to see ethnic and religious conflicts.

Theres an idea called the democratic peace, which is basically that democracies are less likely to fight one another. But there’s also the capitalist peace, which is that capitalist countries and trading countries are less likely to fight one another. It seems that over time, the way the literature is going, the capitalist peace is starting to take over. Some might dispute that, but at the very least, the liberal peace, as it’s sometimes called, includes economic interdependence.

You also claim that fewer citizens are killed in commercial societies.

Yes. Less economically free countries are far more likely to kill their own citizens and violate their human rights. One of the things they’ve found is that the more a country is open to trade, the less likely it is to experience a government-led genocide. When you don’t centralize all the power, it’s a lot harder to go after your citizens.

Even when it comes to citizen-on-citizen violence, or violent crime, you do find a relationship with economic freedom. Government restrictions on the economy tend to create black markets, which are often very violent. One reason for that is there’s no government protection of property rights, because your property is illegal, so you have to protect your own property using violence.

This is an uplifting story one doesn’t usually hear about market economies or commercial societies. Do you have any concluding thoughts?

It’s a story that doesn’t get told very often, but it is robustly demonstrated in the empirical literature.

How can we treat each other better? How can we not be so violent? Well, you could try buying and selling from one another. You could try focusing on your customers. You could try creating value for others. Because here’s the thing, when you engage in commerce, you are trying to create value for someone else, and they are trying to create value for you. Over time, you begin to value that person.

Sometimes people will come at me with that, where they’ll say, “That is very utilitarian. Is it really true friendship?”

Aristotle had three major categories of friendship. He starts with a lower friendship of utility, where someone is useful to you in some way. Then there’s a higher friendship of pleasure, where you enjoy their company to some degree. And then there’s a friendship of excellence, the kind of friendship where you want the absolute best for one another.

So people are often saying, “Commerce doesn’t create top-tier friendship.” Well, maybe not at first, but it does create a lot of lower-tier utility friendships and pleasure friendships. Those friendships may be incomplete in some sense, but they matter. And they’re much better than people being enemies. That’s what commerce really does throughout the world.